Karnataka High Court Stays CCI’s Investigation Against Amazon

The Karnataka High Court granted Amazon interim relief.

An employee scans a package at the Amazon Inc. fulfillment center in Bengaluru, India. (Photographer: Ruhani Kaur/Bloomberg) 
An employee scans a package at the Amazon Inc. fulfillment center in Bengaluru, India. (Photographer: Ruhani Kaur/Bloomberg) 

The Karnataka High Court granted Amazon interim relief by staying the anti-trust investigation directed against it last month, lawyer representing the online retailer told BloombergQuint.

The Competition Commission of India’s investigation against Amazon is without application of mind, perverse and unreasonable, the online retailer argued before the Karnataka High Court.

Amazon is challenging the CCI’s January order which said the allegations of anti-competitive practices against the e-commerce marketplace deserved a detailed investigation. The information was filed by Delhi Vyapar Mahasangh against Flipkart and Amazon.

In its prima facie order, the regulator had concluded that the exclusive arrangements between mobile phone brands and Amazon merit an investigation.

It needs to be investigated whether the alleged exclusive arrangements, deep-discounting and preferential listing by the opposite parties [Amazon, Flipkart] are being used as an exclusionary tactic to foreclose competition and are resulting in an appreciable adverse effect on competition.
CCI’s Jan. 20 Order

Amazon appealed this order before the Karnataka High Court saying the CCI directed this investigation without even giving it an opportunity to respond to the allegations. It has called the CCI’s actions as an “open-ended fishing expedition” and a misuse of its powers. It said the regulator directed this investigation by primarily relying upon the evidence against Flipkart and hence, failed to meet the rule of reason framework.

Amazon is entitled to protection under Articles 14 and 21 of the Indian Constitution against unreasonable, unwarranted, arbitrary and mala-fide action of any government or statutory authority, it said in its petition before the high court. BloombergQuint has reviewed a copy of Amazon’s petition.

This is a repeat of allegations made by All India Online Vendors Association against Amazon earlier which have already been rejected by the CCI. Sellers on Amazon marketplace procure products directly from manufacturers and exclusive launch of mobile phones is a marketing tool used by them for sales promotion, according to the petition.

The company argued that brands which had exclusive sale offers on Amazon marketplace also have a significant presence in the offline market and therefore it cannot be said that exclusive launches by them caused an adverse appreciable effect on competition in the smartphone sale market in India. It said the contracts with third-party sellers don’t stipulate any exclusivity obligations and its services were available to all sellers who register themselves with the Amazon marketplace.

Exclusive supply agreements violate Section 3(4) of the Competition Act and are considered anti-competitive. The CCI order directing the investigation fails to classify the alleged deep discounting, preferential listing and preferred seller arrangement under any category enumerated under Section 3(4) of the Competition Act. This section defines an anti-competitive agreement to include tie-in arrangement; exclusive supply agreement; exclusive distribution agreement, tie-in arrangement; exclusive supply agreement, among others.

Besides challenging the CCI’s prima facie order, Amazon sought a stay on the director general’s investigation until the high court decides on the matter. The company said it was part of the internationally reputed Amazon Group and the news of an anti-trust investigation in India would result in reputation consequences.